While many awards to affected home-buyers have been passed before, this order is unique as it potentially blocks a major loophole in the real estate regulations.
The Maharashtra Real Estate Regulatory Authority (RERA) has been in the news for all the right reasons. In what is being looked at as a landmark judgement, the body has ordered JVPD Properties Private Limited to refund Rs 7.10 crore along with 15% interest to 21 aggrieved home-buyers. While many awards to affected home-buyers have been passed before, this order is unique as it potentially blocks a major loophole in the real estate regulations.
To decode the order and understand what it signifies for home-buyers across the country, we, at The Better India, spoke to the lawyer behind this judgement–Tanuj Lodha, Partner, Lodha & Lodha.
A third-generation lawyer in a firm that was established in 1944, Tanuj hails from an illustrious legal background.
Armed with 18 years of experience, Tanuj is now working with the family law firm, which has been one of the firms that have actively spearheaded the usage of the RERA.
Speaking about the case, he says, “This case pertains to 21 individuals who bought homes with Bhagtani (Director with JVPD Developer) in Mumbai’s suburb, Powai, from 2013-2015.”
“They were all shown various brochures of how the development would come up, with promises of its completion by 2017.”
On the basis of what they heard, the 21 individuals invested in the development.”
While the payment schedule for projects under development is clearly laid down, in this case, the 21 complainants had paid up almost 50% of the total amount from 2013 onwards on false assurances.
In 2017, the developer sent out a letter to all their clients stating that they were unable to receive approvals for the projects and therefore they should either collect their money or have it transferred to another development.
“The group of aggrieved home-buyers made several trips to the developer’s offices, but it led to nothing concrete.”
“To top it all, while they had paid up to 50% of the total amount, the developer never entered into an ‘Agreement for Sale’ with them. In Mumbai, there are two stages – the Allotment Letter and the Agreement for Sale.”
The central law on this states that a home-buyer is entitled to relief only he or she has entered into an agreement for sale with the developer. Possessing an allotment letter did not entitle the buyer for relief.
“When the home-buyers came to me, I did suggest an array of options to them, which included approaching the consumer court.”
“However I was most keen on presenting this matter in the RERA because of its cost-effectiveness and the speedy hearing it provides,” he says.
The High Court fee is extremely high – it’s an ad valorem fee of almost 1.5%. So a person with a property valued at Rs 50-60 lakhs would have to pay anywhere between Rs 60,000-70,000 as the fee.
Approaching the RERA, according to Tanuj, has multiple benefits:
- Court fee is a fixed amount of Rs 5,000, immaterial of the property value
2. The RERA court has wide-ranging powers
3. RERA is a very powerful law that is also practical
4. The case must be heard and adjudicated upon within 60 days
5. The online filing process is very user-friendly
Tanuj and team encountered several challenges along the way. One of the arguments put forth by the developers was that the home-buyers were all investors in the project and therefore RERA would have no jurisdiction in the matter.
The non-signing of the agreement for sale also posed a challenge.
The developer also kept saying that while the approvals had not come through, the intent of the developer was clear and they wanted to build the property, as assured to the home-buyers.
“It was a long uphill fight, but ultimately the court upheld the right of the allottees. The court further held that the Allotment Letter is a concluded contract, wherein the liability of the developer is defined. If the developer was not giving possession as assured, then he should refund the amount.”
The RERA, in this case, also penalised the developer by levying a fine of Rs 30,000 against them towards costs. Furthermore, the court also put a charge on the developer’s properties until such time that he repaid all the 21 home-buyers, with interest.
One of the reasons that this order is significant is because of its view on allotment letters. Until now, even the Apex Court looked at allotment letters as a sub-standard document, but it changes substantially in favour of home-buyers with this order, says Tanuj.
He adds, “The real estate sector is one of the most complicated sectors in the world. To expect a home-buyer to be on top of things is not possible. What the RERA has done is to make the process simple; every developer has to register his project online mandatorily and with that, display the details of all approvals, title certificates, layout plans, and mortgages details, for a potential buyer to verify.”
For Tanuj, this is one victory, but he is aware that there will be several such home-buyers in similar situations for whom this order might bring huge respite.